“Building Life Cycle”Balancing the Equation of Total Ownership Cost
With our ClientsAIAT Green Day Workshop
Emily Violette, PE LEED [email protected]
Wednesday, April 1, 2015
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DiscussDiscussDiscussDiscuss
Now what?Now what?Now what?Now what?
Balancing the Equation of Total Ownership Cost
with our Clients
Building Life Cycle
IntroduceIntroduceIntroduceIntroduce
DefineDefineDefineDefine
DiscussDiscussDiscussDiscuss
Now what?Now what?Now what?Now what?
Balancing the Equation of Total Ownership Cost
with our Clients
Building Life Cycle
AVERAGE BUILDING ENERGY BY %
Cooling
35%Lighting
25%
Water
Heating 2%
Heating 10%
Office Equip. 3%
Refrigeration 3%
Computers 10%
Other 10%Ventilation 6%
Building Life Cycle Champions: Energy
Total Ownership Cost Champions
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Now what?Now what?Now what?Now what?
Balancing the Equation of Total Ownership Cost
with our Clients
Building Life Cycle
Building Life CycleAccording the AIA Guide to Building Life Cycle
Assessment in Practice (2010):
Definitions and Aspects of Life Cycle AssessmentThe LCA process is governed under ISO 14000, the series of international standards addressing
environmental management. According to International Standard ISO 14040, LCA is a
“compilation and evaluation of the inputs, outputs and the potential environmental impacts of a
product system throughout its life cycle.”
The Code of Practice by the Society of Environmental Toxicology and Chemistry (SETAC)
describes LCA as “a process to evaluate the environmental burdens associated with a product,
process, or activity by identifying and quantifying energy and materials used and wastes
released to the environment; to assess the impact of those energy and materials used and
released to the environment; and to identify and evaluate opportunities to affect environmental
improvements.”
The Environmental Protection Agency (EPA) refers to LCA as “a cradle-to-grave approach for
assessing industrial systems that evaluates all stages of a product’s life.”
Building Life Cycle Capability Update: ROAD TO OUR VISION
Total Ownership CostAccording to Investopedia
DEFINITION OF 'TOTAL COST OF OWNERSHIP - TCO'
The purchase price of an asset plus the costs of operation. When choosing among
alternatives in a purchasing decision, buyers should look not just at an item's short-term
price, which is its purchase price, but also at its long-term price, which is its total cost of
ownership. The item with the lower total cost of ownership will be the better value in the
long run.
INVESTOPEDIA EXPLAINS 'TOTAL COST OF OWNERSHIP - TCO'
For example, the total cost of ownership of a car is not just the purchase price, but also
the expenses incurred through its use, such as repairs, insurance and fuel. A used car
that appears to be a great bargain might actually have a total cost of ownership that is
higher than that of a new car, if the used car requires numerous repairs while the new car
has a three-year warranty.
Building Life Cycle Capability Update: ROAD TO OUR VISION
© Copyright 2014 FlexLink. All rights reserved.
Where Does Building Life Cycle Meet Total
Ownership Cost?
Operations
85%
Build
11%
Design 3%
Operations costs include:
• Utilities/ Energy
• Facility Maintenance
• Repairs/ Replacements
• Alterations
• People (Users)
Plan 1%
Begin with Total Cost in Mind
Identify Potential for Building Life Cycle Impact
CommonUnderstanding
CM/GC Hired
Major Trades Hired
Design
Architect Hired
Engineers Hired
≤100%
Schematic
Design
Design
Development
Construction
Documents
Construction
Owner
Understand the Process: Traditional
Time
CM/GC Hired
Concept Design Implementation
Construction
Architect Hired
Engineers Hired
100%
Major Trades Hired
Design
Valid.
Owner
CommonUnderstanding
Traditional
Behaviors & Roles
MUST change!
Understand the Process: Collaborative
• Collaborative team/ behaviors – significant early engagement of key stakeholders (including Owner), mutual trust/ respect, multi-party contract, colocation
• Jointly developed and validated targets – project conditions of satisfaction, values, quality, cost and schedule
• Innovative design and construction processes/ tools – lean, TVD, VSM, commitment based planning, BIM
• Joint project control – joint decision making/ governance, shared risk/ reward, safe harbor decisions, dispute resolution, performance based pay, incentive pool
Understand the Process: Integrated Delivery
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Balancing the Equation of Total Ownership Cost
with our Clients
Building Life Cycle
Individuals whose
behaviors promote team-
building, collaboration,
transparency and trust
3
That foster the complete integration of
services (e.g., Knowledge management,
Building Information Modeling, Lean)
Innovative Tools
2
That create an environment in which the
team puts the project’s welfare first (e.g.,
contract parties share risk and reward)
Integrated Processes
1 People & Teams
© copyright BBC US 2010
Collaborate!
Who is involved? Owner, Broker, Developer,
Program Manager, Property
Manager, Facility Manager,
Manufacturers, Design Team,
Engineers, Construction
Team, sub-contractors
How do each define building life cycle and/or
TOC and why?
Let’s Identify the Stakeholders
What if…
We had defined roles to balance the equation?
What if…
We each had defined roles to balance our equation?
StakeholderOwner
Broker
Construction Team
Design Team
Developer
Engineers
Facility Manager
Program Manager
Property Manager
Manufacturers
Sub-contractors
Value StrengthBusiness proposition
Bottom line/Pro forma
Program solutions
Cost and time
Innovation and technology
Maintenance and operations
Market value
Reliability
Process efficiency
Value streaming
Workmanship
Enhanced Proforma
Optimized Design
Improved Reliability
Increased
capital
investmentDelivery
(Capital Cost)
Tota
l O
wn
ers
hip
Co
st
3 30-50 YEARS
Occupancy(Operational Cost)
Vision: A Step by Step Process
Capital Cost
Budget
Fees
Contingency
Value
adding
work?
Typical
Project
In a typical project uncertainty is
generally managed by contingency
(maybe 10-15% of project cost)
80% of every $1 believed goes to
value adding scope (work)
0.0%
2.5%
5.0%
7.5%
10.0%
12.5%
15.0%
Typical Project
Uncertainty (% project cost)
Owner driven changes
Design ommissions
Construction
coordination
Unforseen conditions
Design errors
Accelerated schedule
Contractor caused delay
Tactics: Traditional Capital Cost Waste Metrics
Capital cost
budget
In an integrated project uncertainty
and delivery inefficiency is seen as
waste (30% of project cost)
65% of every $1 may only go to
value adding scope (work)
0.0%
2.5%
5.0%
7.5%
10.0%
12.5%
15.0%
Integrated Project
Waste (% project cost)
Extended Schedule
(incl Inflation)
Duplicated Effort/ Rework
Assembly Productivity
Oversized Scope/ Program
Typical Uncertainty
Fees
Uncertainty
(15%)
Value
adding
work
Typical
Project
Waste
(15%)
Tactics: Integrated Capital Cost Waste Metrics
Operational
cost
budget
• Uncertainty & Waste in Project Delivery
• Excess debt service, utility costs
• Lost operating income (bldg. or grid issue)
• Poor facility mgmt productivity
• Poor product performance
• Warm/ cold calls
• Inefficient layout/ underutilized eqpt/ space
• Lost productivity
Initial
Capital Cost
Waste
Value
adding cost
to operate
Typical
Project
Tactics: Operational Cost Waste Metrics
VALIDATEALIGN
Business
Case
Sufficient
to PricePreliminary
Cost Final
CostSavings
PROCURE
Expected
Cost
O A/E CM SC MS
Key Players:
IMPLEMENT
Target
Cost
Tactics: Establish a Timeline for Target Cost
Establish TargetsCross Functional Teams
Set Based Design
Tactics: Target Value Design
Tactics: Choose by Advantages
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Balancing the Equation of Total Ownership Cost
with our Clients
Building Life Cycle
FM
$$
Agreed Outcome: A balanced approach to ROI
FOR BBC: A balanced approach to free up cash and balancing the Top Ten Op. Exc.
Agreed Outcome: Balancing the Equation
STEWARDS OF THE ENVIRONMENT WHAT OUR INDUSTRY IS FACINGTHROUGH
“Building Life Cycle”Balancing the Equation of Total Ownership Cost
With our ClientsAIAT Green Day Workshop
Emily Violette, PE LEED [email protected]
Wednesday, April 1, 2015